Looking to retire early, or reduce your working hours? In my view, investing is one path to doing that, though to be successful you'll have to engage your brain and buy shares that beat the market over the long term.
One way to do this is to find companies that have long-term tailwinds (because the market is often short-sighted, undervaluing the long-term trend). The stats show that it's far more difficult to receive market-beating returns (over the long term) if you only invest in large companies, so I've only included one well-known business in this list.
One hot tech stock I'm keen on is the number-three placed real estate website Onthehouse Holdings Ltd (ASX: OTH). The company generates recurring revenues by providing real estate software solutions to real estate agents, and is developing onthehouse.com.au, a distant competitor of realestate.com.au which is owned by ASX titan, REA Group Limited (ASX: REA).
If our obsession with buying houses continues, I wouldn't be surprised if we increasingly visit multiple real estate websites. Even if the consumer portal eventually fails, an investment in Onthehouse is unlikely to be a complete disaster because the already-profitable software-based business continues to grow. I've been waiting for a lower entry point for a while now, with the company sitting near the top of my watchlist.
A much newer entry to the watchlist is Thinksmart Limited (ASX: TSM), a company in which I might have bought shares this week, if I hadn't just made it my top stock for April (temporarily barring me from trading the shares). Basically, it has sold a business for cash, and retains a growing business in the UK. The share price plunged this week on news the company would not go ahead with a capital return as had been mooted.
Given the quick share price recovery, it's clear that there are a few buyers waiting in the wings. The new blog Investtake described the sell-off best: "the market seems to be more concerned with receiving cash now, rather than maximising value in the long run." If that irrationality returns, investors could buy a promising business at a good price.
I've been trying to buy Pulse Health Limited (ASX: PHG) shares all year, but the consistently appreciating share price has defeated me. The company owns an array of hospital assets, and even has a business that provides in-home support to the elderly. The recent trading halt may be because the company is planning either an acquisition or a capital raising or both – though that is pure guesswork on my behalf. My inability to bring myself to pay up for exposure to the ageing population has surely robbed me of gains in this instance. An announcement, positive or negative, should be out around the time this article is published.
Speaking of the ageing population, that's a trend present in developed economies around the globe – and the most likely ASX blue-chip to benefit is CSL Limited (ASX: CSL). The company's share price is underpinned by a continual buyback, and there's a good argument to be made that CSL's size is a formidable business moat. That's because its distribution network allows it to deliver health products and vaccines to most countries on earth at low cost, while its solid cash flow funds and a top-notch R&D program keep the company ahead of competitors.
Microcap Careers Multilist Limited (ASX: CGR) first caught my attention in 2012 when it was essentially a recruitment company (though it had plans to grow). I remember I appreciated the response I received from Share Advisor analyst Scott Phillips, when I asked him for his thoughts. Unfortunately I lacked the wisdom to hold on to the shares, which have since almost tripled because of the success the company had growing its newer business segments.
The company also provides payroll solutions, which I imagine would be a bit less exposed to fluctuations of the employment market than recruitment services. Furthermore, it is growing its cashflow financing business – where it advances cash to other businesses, to the value of 80% of inventory. That does seem a bit risky to me, but while the going is good I expect it will be quite lucrative.
Foolish takeaway
More than a few investors have let profitable and growing companies multiply their wealth over the long term, allowing them relative freedom. With market-beating returns, sensible saving and well-researched positions, everyday Australians can bring forward their retirement plans. A couple of small-cap stocks can supercharge your portfolio, and I'm of the belief that these five companies are worthy of further research and a spot on your watchlist.
